Government narrows budget deficit

The country’s budget deficit narrowed sharply to P15.4 billion in January amid improved revenue collections, President Arroyo announced yesterday.

The January figure was a notable improvement from the P20.9-billion target for the period in review and was 6.4 percent lower than the P16.5-billion shortfall recorded in the same period last year.

"Aside from our healthy stock market and increased confidence in the peso, there are now more reasons for increased surges in capital," the President said. "We can now further increase spending for infrastructure and education," she added.

The Bureau of Treasury (BTr) reported that revenue collection for January reached P72.6 billion, up from P64.3 billion a year ago.

"The trend seems promising and if tax collection efforts continue, the fiscal problem may be eradicated,’’ said Emma Pante, an economist of Rizal Commercial Banking Corp.

The full-year deficit may "be even better than the P125 billion target."

The government aims to narrow the deficit to that level from P146.5 billion last year and offer investors lower yields on its bonds.

It has to sell $900 million more debt this year following a $2.1 billion sale in January.

Mrs. Arroyo’s efforts to balance the budget led Fitch Ratings and Standard & Poor’s to upgrade the outlook for the country’s debt rating to stable from negative.

The President increased the expanded value-added tax (EVAT) to 12 percent from 10 percent, after expanding it on Nov. 1 last year to cover oil, power and other previously exempt products and services.

The tax changes are expected to raise an extra P75 billion this year.

The value-added tax expansion yielded an additional P2.4 billion in January, Assistant Finance Secretary Gil Beltran said yesterday.

Total revenue rose to P72.6 billion from P64.3 billion a year before, according to the BTr. Government spending rose 8.9 percent to P88.1 billion.

Mrs. Arroyo aims to balance the budget by 2008 to reduce debt and cut borrowing costs. Government debt has nearly tripled to P3.9 trillion since the country last posted a surplus in its annual budget in 1997.

A third of the budget goes to interest payments on debt, leaving less money for public works like building roads, bridges and schools to spur the economy.

Mrs. Arroyo said she also ordered Budget Secretary Rolando Andaya Jr. to release an additional P500 million for education on top of the P500 million earlier disbursed for the sector."I want to pump prime the economy and now it is better because we have collections to spend for that unlike before when the government does not have any money," she said.

The government is forecasting growth in the economy will accelerate to 6.3 percent this year from 5.1 percent last year.